Gold price is eyeing central banks' reaction to coronavirus – INTL FCStone

Gold price is eyeing central banks’ reaction to coronavirus – INTL FCStone

(Kitco News) Trying to measure economic fallout from the coronavirus is a difficult task, but when it comes to figuring out the virus’ impact on gold, investors should be paying attention to what central banks around the world are doing.

Any additional easing that might stem from slower economic growth will boost the case of holding gold long-term, said Rhona O’Connell, INTL FCStone head of market analysis for the EMEA and Asia regions.

“The potential industrial fallout from coronavirus is already leading a number of governments to cut interest rates or add to easing activity, while the U.S. 10-year bond has been dipping in and out of negative territory. This is all positive for gold in a risk-averse environment, although by definition we cannot know for how long it will be before this outbreak is controlled,” O’Connell wrote on Wednesday.

Equities have been rising this week as they recover from an earlier sell-off triggered by coronavirus fears. Gold saw some selling but managed to hold its $1,550 support level and consolidate above the $1,560-an-ounce level.

“The ?nancial markets have been a hive of activity since China’s return and after a rout on Monday … There was an almost palpable wave of relief on Tuesday when the People’s Bank of China (PBoC) continued injecting liquidity on a grand scale. This propelled Chinese equities higher and equities around the world were happy to take their cue accordingly,” O’Connell said.

But these market moves are just short-term noise, she added. What investors should be focusing on is what central banks from around the world decide to do next when dealing with the economic fallout from the virus.

“Asian governments are already starting to look at interest-rate decisions,” O’Connell pointed out. “Thailand has already cut rates … to a record low of 1.0% for its benchmark rate, arguing that a large number of businesses would be a?ected by the coronavirus as well as drought and a delay in passing the budget.”

The Philippines' central bank also cut rates this week by 25 basis points to 3.75% in response to the coronavirus.

On top of that, the Reserve Bank of Australia could be looking at cutting rates soon if economic growth is not fast enough in light of bush?res and coronavirus fallout. Other countries that recently cut rates further include Iceland and Bahrain. The European Union and Japan’s interest rates are already in the negative territory, O’Connell added.

“The interest-rate environment and the injection of liquidity into di?erent economies could well add a supportive factor to the market. Arguably this is already being priced in, but it should continue to be a tailwind in an era of ?nancial risk,” she wrote.

 

By Anna Golubova

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Gold falls 1% as China works to stem economic impact of virus

* Gold to stay in $1,550-$1,600/oz range for now – analyst

* Palladium jumps more than 4%

* U.S. factory orders rise above expectations

By Diptendu Lahiri

Feb 4 (Reuters) – Gold slid more than 1% on Tuesday as China’s steps to mitigate the economic impact of the coronavirus epidemic drove some investors away from safe havens and back into riskier assets.

Spot gold fell 1.61 % to $1,550.69 per ounce by 1:40 p.m. EST (1840 GMT), after hitting its lowest since Jan. 21 at $1,548.70. U.S. gold futures settled down 1.7% at $1,555.50.

“The dramatic move in global equity markets, especially in the U.S. markets, clearly indicates there is lesser concern about coronavirus denting GDP and we have a lesser need for safe havens,” said David Meger, director of metals trading at High Ridge Futures.

Wall Street built on a recovery in world stocks as fresh intervention by China’s central bank calmed investor nerves.

Beijing’s efforts included signing off on more government spending, tax relief and subsidies for virus-hit sectors, policy sources said.

The outbreak has undermined the country’s economic activity as cities are locked down, with travel restrictions and businesses closed.

Further, the dollar strengthened, making gold more expensive for buyers holding other currencies.

 

Nevertheless, some uncertainty remained about the extent of the impact on the Chinese and global economies.

“In case the impact of the virus is less than the market has priced in, it could lead to a correction in gold prices, but as long as we don’t see economic growth accelerate, gold prices will remain supported,” said Quantitative Commodity Research analyst Peter Fertig.

Some traders have also started to price in a cut to U.S. interest rates by June.

Lower interest rates reduce the opportunity cost of holding the non-yielding bullion.

Gold should stay within a range of $1,550 to $1,600 an ounce ahead of more political and economic headlines, George Gero, managing director at RBC Wealth Management, said in a note.

On the economic front, new orders for U.S.-made goods rose 1.8%​​ in December, beating analysts’ consensus forecast of a 1.2% gain.

India’s gold imports in January plunged 48% from a year earlier as a rally in local prices near record highs prompted buyers to curtail purchases, a government source said.

Elsewhere, palladium gained 4.5% to $2,423.76, after touching its highest since Jan. 24 at $2,435.

“Now that optimism has returned to financial markets, it seems that market participants have forgotten their fears of how the spread of the coronavirus might affect demand,” Commerzbank analysts said in a note.

“Nonetheless, the consequences for China, the main consumer of palladium, are likely to be very serious.”

Silver fell 0.5% to $17.57, while platinum dipped 0.4%, to $962.83

 

(Reporting by Diptendu Lahiri and Sumita Layek in Bengaluru; Editing by Richard Chang and Tom Brown)

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Gold prices have formed a bottom – expect the next rally to target $1,900

Gold prices have been consolidating for a few months already, and the next breakout could take prices to 2011 highs of $1,923, this according to Peter Reznicek, head trader at shadowtrader.net.

“For me, the target just has to be the prior all-time high in 2011. I’m just looking at the $1,923 level, that would be fine, and then reassess the situation from there,” Reznicek told Kitco News.

Gold prices have been trading between $1,500 and $1,600 for quite some time, but Reznicek said that this consolidating movement is a very bullish sign.

“I like gold, I’m a long-term bull, I have been a long-term bull for quite some time. The way that I like to look at gold is simply to keep the technicals on as long of a timeframe as possible, so for me, I always go out to the monthly and I trade gold contracts, ETFs, and options as well according to those monthlies,” he said.

He added that since 2000, the market has been in a long-term uptrend that has just developed a bottom.

“This bottom on the monthly has taken years to develop and we’ve only started to see the breakout from that in about mid-2019 and that’s the rally that’s underway now,” Reznicek said.

 

By Kitco News

 

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Gold price starts week with small gains as China returns from holidays; coronavirus continues to spread

(Kitco News) – Global financial markets are taking the further escalation in the coronavirus in stride as S&P 500 futures start the new trading week in slightly positive territory.

However, investors aren't entirely ignoring risks as gold prices are also starting the week in positive territory, with some analysts looking for prices to push to $1,600 an ounce in the near-term.

March S&P 500 futures last traded at 3234 points, up 0.32% on the day; meanwhile, February gold futures last traded at $1,588.70 an ounce, up 0.37% on the day.

Market analysts and investors are particularly focused on this week's Asian open as China returns from its week-long Lunar New Year celebrations. However, investor sentiment could remain subdued; according to Chinese media, the China Securities Regulatory Commission had issued a verbal directive to brokerages to bar their clients from selling borrowed stocks.

The People's Bank of China is also pumping $21.7 billion into money markets to make sure there is enough liquidity as markets reopen after the holiday week.

The steps come after news that the coronavirus continues to spread. According to media reports, more than 300 people in China have died as a result of the virus. The number of infected people has jumped to more than 14,000.

International media are also reporting that the first person outside of China has died from the coronavirus.

It is still unclear what impact the virus will have on the health of the global economy. Still, some economists are already expecting to see a significant slowdown.

"There is still such little clarity on the fallout on China's economy, although we know it's going to be brutal and traders naturally are sensing an inevitable fallout in activity in China's key trade partners," said Chris Weston, head of research at Pepperstone in a report Sunday.

The growing uncertainty continues to support gold prices, according to some analysts.

In a recent comment to Kitco News, Lukman Otunuga, senior research analyst at FXTM, said that he is closely watching $1,600 an ounce.

"Growing fears over the coronavirus outbreak and negative impacts it may have on global economic growth should stimulate appetite for gold in the week ahead. Gold is trading around $1585 as of writing and could target $1600 in the short to medium term as risk aversion remains a dominant market theme," he said.

Other analysts have been disappointed with gold's performance in the face of growing negative investor sentiment. However, analysts at Capital Economics, said that gold prices have a chance to rally further as the virus continues to spread.

"There is scope for gold to rise much further if the Wuhan virus is not contained in the coming weeks. Indeed, if factory closures are further extended across mainland China, there could be a global economic fallout, which would be supportive of the gold price," the analysts said in a report Friday.

 

By Neils Christensen

For Kitco News

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PRECIOUS-Gold set for best month in five as virus stifles risk appetite

* World share index heads for worst week since August

* WHO opposes restrictions on travel or trade with China

* Gold gains over 4% so far this month, Palladium up 18%

Jan 31 (Reuters) – Gold prices rose on Friday and were heading for their best month in five as worries over economic growth due to the fast-spreading coronavirus boosted appetite for safe havens.

Supply-squeezed palladium, meanwhile, was on track for its biggest monthly percentage gain since November 2016.

Spot gold was up 0.8% at $1,585.66 per ounce by 01:55 p.m. EST (1855 GMT). The metal has gained more than 4% so far this month.

U.S. gold futures settled 0.1% lower at $1,587.90.

“Coronavirus continues to be a strong factor of support as we are seeing global growth concerns hurting other markets across the board. As a result, we’re seeing safe-haven demand drive into gold,” said David Meger, director of metals trading at High Ridge Futures.

“Gold is the quintessential safe-haven asset that money managers are viewing as an alternative for cash.”

The World Health Organization declared the epidemic a global emergency after the virus killed more than 200 people.

“At this point, it’s not something the Chinese economy can shrug off. There will be a hit to growth, the magnitude of which will be difficult to chisel out in detail for quite a while,” said Ilya Spivak, a senior currency strategist at DailyFx.

The virus fears gripped financial markets, overshadowing the latest batch of upbeat corporate earnings.

“Gold is both continuing to find favour as a traditional safe haven and, at the same time, run into strong resistance on the run-up to $1,600, which is keeping a lid on gains,” OANDA analyst Craig Erlam said in a note.

On the physical side, however, an extended holiday in top consumer China due to the outbreak dimmed activity in Asian bullion hubs.

Auto-catalyst palladium, which is in short supply, has risen 18% so far this month, having hit a record high of $2,582.19 per ounce on Jan. 20. On the day, palladium was down 1.2% at $2,283.19.

“Palladium prices have really been in their own world … there is lot of demand for it in a tight supplied environment. We are seeing what industrial demand can do for prices,” High Ridge Futures’ Meger said.

Silver rose 1.1% to $18.02 an ounce. Platinum dipped 1.9% to $959.33 and was on track for its worst week since early November. (Reporting by Brijesh Patel in Bengaluru; Editing by Chris Reese and Steve Orlofsky)

 

By Brijesh Patel

 

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